Lamson v. Maryland Casualty Co.
| Decision Date | 22 June 1923 |
| Docket Number | 34924 |
| Citation | 194 N.W. 70,196 Iowa 1185 |
| Parties | C. O. LAMSON et al., Appellants, v. MARYLAND CASUALTY COMPANY, Appellee |
| Court | Iowa Supreme Court |
REHEARING DENIED DECEMBER 14, 1923.
Appeal from Black Hawk District Court.--E. B. STILES, Judge.
THIS is an action on a surety contractor's bond to recover the excess cost of a building which, on account of the contractor's default, the owner was compelled to complete. A jury was waived, and the issues submitted to the court upon an agreed statement of facts. Judgment was entered by the court, dismissing plaintiffs' petition, and against them for costs. Plaintiffs appeal.
Affirmed.
Clark & Clark and Mears & Lovejoy, for appellants.
Edwards Longley, Ransier & Harris and C. H. E. Boardman, for appellee.
On or about the 26th day of April, 1913, appellants, plaintiffs in the court below, entered into a written contract with the Dunphy-Fridstein Company, a Wisconsin corporation engaged in the business of erecting large buildings, for the construction of a "seven-story and basement reinforced concrete and masonry constructed fireproof hotel building (of construction sufficiently strong for two additional stories), to be known as Hotel Russell-Lamson, to be erected * * * in conformity with the drawings and specifications and addenda thereto made by Marshall & Fox, architects (which drawings consisting of plans, sections, details and elevations and specifications, are signed by the parties hereto, and are hereby made a part of this agreement), * * *"
The contractor agreed to furnish all material and labor and to complete the building for a consideration of $ 265,000, payable upon certificates signed by architects. Appellee surety company entered into an undertaking guaranteeing performance of the contract as follows:
On October 3, 1913, an additional agreement was entered into by appellants and the contractor, which was prepared by the architects and designated as a "construction order. " It is in the form of a letter addressed to the contractor, the approval and agreement of the parties being indorsed thereon. By this contract the builder agreed to erect and complete an eighth, or additional, story to the building, at cost plus 10 per cent, guaranteeing that the expense would not exceed $ 16,000. The contractor abandoned the work in February, 1914, and in April of that year was adjudged a bankrupt, without assets for the payment of creditors. Prompt notice of the default of the contractor was given to the surety, which replied, denying liability, and claiming that, because of certain changes, alterations, and deviations from the contract, it was released. Thereupon, appellants completed the building at an expense in excess of the contract price. This action is for the recovery of such excess.
The appellee set up various defenses in its answer, some of which it will not be necessary to mention. The two propositions urged most strongly in argument are: (a) That the addition of a complete story to the building was such a departure from the original plans and specifications and the contract for the erection of the hotel as to discharge the surety; and (b) that the fair value of the addition was not fixed or agreed upon by the parties, as required by the contract, and that the record does not furnish a basis for ascertaining such value. The particular deviation from the original contract complained of is the erection of an additional or eighth story to the building. The contract authorized alterations or deviations from the drawings and specifications and additions thereto, as follows:
"It is further agreed that said party of the first part may at any time during the progress of said work make any additions to or alterations or deviation from, said drawings and specifications without invalidating this agreement; but a fair value of the same shall be added to or deducted from, as the case may be, the moneys herein agreed to be paid by the said party of the first part, provided that no new work of any description done on the premises, or any work of any kind whatsoever, shall be considered an extra, or a charge in excess of the amount herein agreed to be paid, unless a proper estimate in writing of the same before its commencement shall have been submitted and agreed to, and signed by said architects and said party of the first part, and provided further, that should any dispute arise respecting the fair value of the work omitted or added by the party of the second part, the same shall be determined by three persons, one chosen by the party of the first part, and one by party of the second part, the two so chosen choosing a third, and a decision of the majority of the three so chosen shall be binding upon the parties hereto."
The answer of appellant to these contentions on the part of appellee is that the contract authorized the addition of the eighth story to the building, and that the supplemental contract for the erection thereof fixed the fair value of such addition at cost plus 10 per cent, and that it is immaterial that the actual expense incurred by appellant in the construction of said-additional story exceeded $ 16,000. It is stipulated that the cost thereof exceeded $ 25,000. The law is well settled that, where a surety company, for a consideration, enters into an undertaking to guarantee the faithful performance of a builder's contract which provides that changes, alterations, and additions may be made in the building, the bond is not invalidated by changes or additions made in accordance therewith and in conformity thereto. Bartlett & Kling v. Illinois Surety Co., 142 Iowa 538, 119 N.W. 729; People's Lbr. Co. v. Gillard, 136 Cal. 55 (68 P. 576); National Surety Co. v. Long, 79 Ark. 523 (96 S.W. 745); United States v. Walsh, 115 F. 697; McMullen v. United States, 167 F. 460; American Surety Co. v. Scott & Co., 18 Okla. 264 (90 P. 7); Dunne Inv. Co. v. Empire State Surety Co., 27 Cal.App. 208 (150 P. 411); Jersey City Water Sup. Co. v. Metropolitan Const. Co., 76 N.J.L. 419 (69 A. 1088); American Surety Co. v. Lauber, 22 Ind.App. 326 (53 N.E. 793). Also, that the contract of a paid surety is construed most favorably to the party for whose benefit it was executed. Hileman & Gindt v. Faus, 178 Iowa 644, 158 N.W. 597; Streator Clay Mfg. Co. v. Henning Vineyard Co., 176 Iowa 297, 155 N.W. 1001; Van Buren County v. American Surety Co., 137 Iowa 490, 115 N.W. 24; Brandrup v. Empire St. Sur. Co., 111 Minn. 376 (127 N.W. 424).
The difficulty lies in the construction of the contract and in its application to the facts of each case. Many cases are cited by counsel on both sides, tending to support their respective theories of this case. The court in each of the cases cited by appellant sustained the liability of the surety; whereas a contrary conclusion was reached in the cases relied upon by appellee. A distinction is sought to be drawn by appellant between the language and import of the contract in the case at bar and the cited cases...
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Lamson v. Md. Cas. Co.
...196 Iowa 1185194 N.W. 70LAMSON ET AL.v.MARYLAND CASUALTY CO.No. 34924.Supreme Court of Iowa.June 22, 1923 ... Appeal from District Court, Black Hawk County; E. B. Stiles, Judge.This is an ... ...